Various articles discuss who has won the trade war between Europe and USA (eg, Politico-1). Apparently, the more taxation, the better. Seriously?? This lack of perspective worries me. France (and others) complain about the lack of reciprocity of import tariffs for USA (eg, Politico-2).
Such articles forget – or ignore – some very important things:
Impact of import tariffs:
- Tariffs will hurt the P&L of businesses;
- Tariffs will cause consumer inflation (eg, CPI);
while - Tariffs will benefit government taxation.
USA (15%):
- yes
- yes
- yes
EU-27 (0%):
- no (ceteris paribus)
- no (ceteris paribus)
- no (ceteris paribus)
Conclusion re USA:
The above will hurt the new US president whenever he needs to maintain his razor thin majority. Hence, the 15% US import will hurt American (i) businesses (eg, P&L), (ii) consumers (eg, inflation), and (iii) the 2025 US President. So, who won??
Conclusion re Europe:
The 15% U.S. import tariffs can (now) be viewed as an American minimum threshold. Hence, Europe did not deteriorate its international competition position. Every country with higher US import tariffs will now lose from Europe.
In the American ideological view, its import tariffs will benefit American industry because Asian and European imports will get more expensive. In the long term, this should – indeed – be true. However, such economic & finance arguments ignore American quality issues (eg, Quora).
The French – rather than European – ideological view can be summarized by as follows:
“Accord Van der Leyen-Trump : c’est un jour sombre que celui où une alliance de peuples libres, rassemblés pour affirmer leurs valeurs et défendre leurs intérêts, se résout à la soumission.”
Translation by Politico: It is a dark day when an alliance of free peoples, united to assert their values and defend their interests, resigns itself to submission.Source: French Prime Minister François Bayrou in a Twitter-X post
In my pragmatic view, there are no winners in this American trade war. All sides have lost but USA has lost the most. Latter will only become visible in due time.
UPDATES:
- Bloomberg, July 22: US Companies, Consumers Are Paying for Trump’s Tariffs, Not Foreign Firms;
- WSJ, July 24: Trump’s Tariffs Are Being Picked Up by Corporate America;
- Governor Gavin Newsom, July 30: Trump tariff policy continues to cause chaos in American economy;
- WSJ, July 31: Why Ford’s Made-in-America Strategy Hurts It in Trump’s Trade War. Company says new tariff deals with Japan, EU and South Korea put it at a disadvantage;
- WSJ, August 1: Buying a Swiss Watch in America Is About to Get a Lot More Expensive;
- DPG, August 1: Trump zet door met zijn invoertarieven, maar de rekening gaat toch vooral naar de Amerikaanse consument.
The Winner Takes It All (1980) by ABBA
band, lyrics, video, Wiki-band, Wiki-song
Verse 1:
I don’t wanna talk about things we’ve gone through
Though it’s hurting me, now it’s history
I’ve played all my cards
And that’s what you’ve done, too
Nothing more to say, no more ace to play
Note: all markings (bold, italic, underlining) by LO unless in quotes or stated otherwise.
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